Finance Minister Nicola Willis has welcomed the Reserve Bank’s decision to ease Bank capital requirements.
The Reserve Bank announced today that it was winding back some of the additional capital requirements imposed on banks in 2019 including adjusting risk weights.
“Since 2019 concerns have been raised that the Reserve Bank’s capital settings may be undermining competition and reducing lending to New Zealanders,” said Minister Willis.
“Higher costs for banks translate to higher lending costs for New Zealanders and, potentially, less lending to the agricultural and other important sectors.
“Therefore, when I issued the new Financial Policy Remit to the Reserve Bank last year I outlined the Government’s expectation that it should ensure that prudential regulation of the banking sector did not impede competition.”
The Minister said the new requirements announced today remain prudent and strike a better, more graduated balance between risk and competition.
“In particular, the adjustments to risk weights are expected to enable smaller deposit takers to compete more effectively against the big four banks. They also open the door to more lending to the agriculture sector.”
“These changes are part of a larger suite of measures to increase competition in the banking sector. The changes announced today will be introduced gradually over the coming years.
”They support our Government’s plan to fix the basics and build the future,” she said.
The Co-operative Bank Chief Executive, Mark Wilkshire said the decisions strike a better balance between financial stability and efficiency, while recognising the challenges faced by smaller banks.
“We are pleased to see the Reserve Bank respond to feedback from domestic banks by adjusting capital settings to reflect the risk levels and introducing more granular risk weights, which results in lower capital requirements. These changes will ease some of the constraints that have limited growth for smaller banks and will help us deliver more choice and better value for customers,” said Mr Wilkshire.
